How millennials are reshaping the restaurant industry

Millennials spend more on dining out than any other demographic, to the tune of $92 billion in 2016. That number is only expected to grow as their earnings increase.

So it’s no surprise that millennial tastes are reshaping restaurants, from the food they serve to the way it’s ordered. That means food trending toward natural, organic, and plant-based. Some 40 percent of millennials are reportedly taking on a plant-based diet.

While millennials eat out, they also like to order in, prompting technological changes in how restaurants take orders, accept payments, and design their websites and mobile apps.

Restaurants’ ability to meet new preferences and expectations in the last year has had a significant effect on their ACSI scores. After a drop last year, full-service restaurants rose 3.8 percent to 81. Fast food edged up 1.3 percent to 80.

But where the improvements—and the need for improvement—are most obvious is in the ACSI scores for every element of customer satisfaction.

What restaurants are getting right?

Full-service, sit-down restaurants have improved across nearly all aspects of the customer experience.

Food order accuracy remains a strong point with a score of 89, up 2 percent year over year. Restaurant staff are more courteous and helpful—another 2 percent gain to 87.

Food quality (up 4 percent to 87) and food variety (up 4 percent to 86) show strong gains in areas that cater to millennial preferences for fresh, quality ingredients and customization. Beverage quality (86) and variety (83) are also much improved this year.

Full-service restaurant layout and cleanliness rates well at 86 and continues to exceed the fast food industry (84).

Fast food restaurants are right behind the full-service category in highly accurate order fulfillment, rising 1 percent year over year to 88. It remains by far the top-rated aspect of the fast food experience. Staff do a good job of serving customers (85) and food quality rose 1 percent to 85.

The element that improves the most is also the fast food industry’s reason for being: speed of check-out or delivery. Service speed is up 2 percent to 84.

Where restaurants have room to improve

Food-to-table service from full-service restaurants is quicker (up 2 percent to 83), but lags fast food check-out and delivery speed (84).

The only element to weaken for the full-service category is website satisfaction (83). This should alarm restaurants as online ordering continues to gain traction with customers and off-premise dining becomes more critical for boosting sales.

Unlike the full-service segment, fast food beverage quality has not improved (84) and beverage variety is somewhat lacking (79 compared to 83 for full service). Food variety is at the lower end of the spectrum, steady at 81. Fast food website satisfaction, unchanged at 82, is close to that of full-service restaurants (83).

Restaurants that are getting it right

Among both full-service and fast-food restaurants, several brands improved significantly over the last year. That can be attributed at least in part to the various improvements they undertook, many of which cater to millennial tastes.

Red Robin jumped 8 percent to an ACSI score of 79. In the last year, it rolled out a veggie burger. It tested a new delivery-only concept that operates without a traditional storefront in downtown Chicago. It embraced digital ordering, allowing customers to place orders with a specific pick-up time, prepay, and customize burgers just as they would at a physical Red Robin location.

TGI Friday’s, up 4 percent year over year to a score of 79, is taking delivery to a new level by delivering alcohol as well as food—a new concept for restaurants. It also partnered with Beyond Meat to offer its plant-based Beyond Burger. It has invested heavily in technology, from Alexa skills to virtual bartenders.

On the fast food side, Pizza Hut, which jumped 5 percent to a score of 80, is also testing beer and wine delivery, and might soon deliver pizzas with autonomous delivery trucks. It also rolled out a new loyalty program that rewards online orders.

Millennials have been blamed for ruining everything from running to napkins. Their preferences are certainly reshaping industries. But, at least in the case of restaurants, their desire for choice and customization; fresh, quality ingredients; and a better ordering experience on websites and mobile apps is moving both full-service and fast food restaurants in a positive direction.

Full-Service Restaurants Falter Amid Slumping Sales

Casual dining spots are suffering from similar circumstances plaguing major retailers—slowing sales and shrinking foot traffic—as once-vibrant malls lose favor with Americans. At the same time, U.S. consumers are less satisfied with sit-down venues to the point where fast food now takes the lead in the American Customer Satisfaction Index (ACSI).

Just a year ago, full-service restaurants were rated among the top four industries tracked by the ACSI. Now the industry dives 3.7% to a score of 78 on ACSI’s 100-point scale, allowing fast food to slip past at 79—a first in ACSI history. For companies that depend on quality to justify higher prices, it is sobering news when lower-price competitors can deliver a more pleasing experience.

As menu prices rise, lower grocery costs may be encouraging more Americans to dine at home, and younger consumers seek quicker service, convenience, and healthier choices. Amid these changes, many sit-down chains are looking to redefine themselves, including off-premise options and menu upgrades.

The top restaurant continues to be Cracker Barrel, up 1% to 84—a score that makes the Americana-themed entrant a customer favorite. Second-place Texas Roadhouse beats other steakhouses with a score of 82, although Outback Steakhouse gains 4% to 80. Darden’s LongHorn Steakhouse tumbles 6% to fall below average at 77, tied with an improved Chili’s.

Another Darden chain, Olive Garden, holds stable at 81 and it continues to generate sales, aided by to-go order increases. Also hitting 81, Red Lobster rises 3% to a four-year high after investing in better ingredients to upgrade its menu.

For Applebee’s, introducing wood-fired grills has yet to pay off in improved satisfaction and the chain is unmoved at 79. Ruby Tuesday also stagnates at 78 and earlier this year put itself up for sale amid store closings. TGI Fridays falls 3% to 76, tying Denny’s (+3%).

In last place, Red Robin plummets 9% to 73 as its first-quarter same-store sales drop. Red Robin, like many establishments with a mall presence, is not immune to changes in consumer shopping habits. As such, the company is testing delivery and catering options, as well as rethinking its mall locations. For casual dining overall, it remains to be seen if efforts like these will be enough to turn around customer satisfaction and bolster sales in the long term.

Consumer Affairs: Survey Shows Consumers Prefer Fast Food to Full-Service Restaurants »

FSR Magazine: Report: Full-Service Restaurants are Losing to Fast Food »

Is Fast Food No Longer Just Fast?

On average, U.S. households dined at either full-service or fast food restaurants about twice per week in 2012, a rate expected to continue in 2013. Fast food shows an edge in being chosen somewhat more frequently, and its customer experience is looking surprisingly good in side-by-side comparison with full-service dining.fullservicefastfood

Customers are mostly pleased with their sit-down dining experiences. Restaurants have good layout and cleanliness (87). Staff are courteous, helpful (87), and accurate with orders (89). Benchmarks for menu variety, food quality, and beverage quality range from 86 to 87. Even the websites of full-service restaurants score significantly higher than the average for all restaurants (78.3). The weakest link in customer’s appraisal of their actual dining experience is the speed of service (83).

For fast food, order accuracy (85) and beverage quality (84) receive the highest marks. Layout and cleanliness, along with speed of check-out or delivery, score fairly high at 83. Courtesy and helpfulness of the staff is relatively satisfactory (82), as is satisfaction with websites (82). The lowest scores are for food and beverage variety and food quality, all 81.

While customers are somewhat happier with their experiences at full-service restaurants compared to fast food outlets, overall customer satisfaction between the two has been very close for the last two years. For 2013, the full-service category scores 81 (on a 0-100 scale), while fast food is stable at 80 for a second year. Because low cost continues to be a pull for many consumers, the relatively strong overall performance of fast food may be too close to comfort for full-service chains.